PM Daily Market Commentary - 5/9/2018

Gold fell -2.20 [-0.17%] to 1312.80 on very heavy volume, while silver edged up +0.01 [+0.06%] on moderate volume. The buck made new highs, but ultimately ended up falling -0.09%; that's not a big drop, but it may have marked a top.

Gold sold off alongside the Euro today, but once the Euro stopped dropping, so did gold, which rallied back off the lows. The high wave candle had a 35% chance of being a bullish reversal, but forecaster fell -0.06 to -0.15. That's a slight downtrend. Gold seems to be finding support at the 200 MA. My sense is, gold has done fairly well to avoid selling off hard during the recent dollar rally.

COMEX GC open interest rose 5,951 contracts.

Rate rise chances (June 2018) jumped back up to 100%.

Silver had a fairly wide trading range today, but ended up largely unchanged, printing a neutral doji candle on the day. Forecaster wasn't happy, dropping -0.10 to 0.00. Once again, silver has failed to close above the 50 MA, which appears to be acting as some fairly strong resistance right now. A break above the 50 would be a bullish sign.

Miners were mostly unchanged today; GDX fell -0.22% on light volume, while GDXJ rose +0.03% on light volume also. Candle prints were all neutral. XAU forecaster fell -0.14 to -0.33. Of all the mining indexes, only GDXJ remains in an uptrend. Right now, XAU looks to be in a descending triangle pattern; a break above the downtrend line would be bullish.

The GDXJ:GDX ratio moved up slightly, and the GDX:$GOLD ratio fell slightly. That's neutral.

Platinum moved up +0.20%, palladium rose +0.60%, and copper dropped -0.23%. That's not much movement. Palladium and platinum are inching higher, while copper's downtrend is slowing. Its hard to know if the recent moves higher in PA and PL are more than just dead cat bounces. Silver would probably benefit if the other metals started to move higher.

The dollar fell -0.08 [-0.09%] to 92.66. While the buck did make a new high today, the candle print was a bearish harami, which had a 43% chance of marking the top. Forecaster agreed, falling -0.16 to +0.12. Momentum in the dollar uptrend is really starting to slow. The buck has rallied 4% over the past 4 weeks, which is a fairly strong move, but a pause in the uptrend at this point wouldn't be too surprising.

Crude rallied +1.21 [+1.73%] to 71.22, breaking out to a new multi-year high that dates back to late 2014. The forecaster jumped +0.17 to +0.42, which is a fairly strong uptrend. Volume today was very heavy. EIA report was bullish [crude: -2.2m, gasoline: -2.2m, distillates: -3.8m] – but the market didn't seem to have a specifically strong reaction at the moment of release. In spite of the jump in oil prices following Trump's action yesterday, longer term, it may end up effectively terminating the OPEC production agreement. It appears that Trump has a quid pro quo with Saudi Arabia that if he confronts Iran, taking Iranian oil offline, then the Saudis will make up the difference. https://oilprice.com/Energy/Energy-General/Did-Trump-Just-Kill-The-OPEC-Deal.html

SPX shot up +25.87 [+0.97%] to 2697.79. Today's rally took SPX above the 50 MA, which is a bullish sign. Energy led (XLE:+2.04%) while utilities once again did worst (XLU:-0.70%). The sector map looked relatively bullish, but SPX has yet to break above its downtrend line.

VIX fell -1.29 to 13.42. Volatility is really starting to decline.

TLT plunged -0.60%, and TY confirmed, dropping -0.19%. Bonds are moving deeper into downtrend. The 10-year treasury yield closed just above 3%. We may be nearing a breakout.

JNK rallied +0.14%. Whatever problems are affecting treasury bonds, JNK appears to be immune. Most likely, that's because of the strong move higher in energy prices. All that junky debt owed by the shale drillers looks a whole lot more payable with oil prices above $70.

CRB rose +1.61%, with 3 of 5 sectors rising, led by energy (+2.94%). CRB looks as though it might be ready to break out.

So what does all that mean? The 10-year looks like it is getting ready to break above 3%. if the pace of the increase is slow, that shouldn't cause too much of a problem, but if things get disorderly, it would probably cause a bit of havoc in equities too.

In the meantime, gold and silver have just been chopping sideways, as oil makes new highs. That's ok, given the recent strong rise in the buck.

Ultimately, it doesn't appear to be gold's time just yet. There is no crisis of confidence. As rates increase, national budgets will start to blow out as interest payments rise, and companies will start to fail. Maybe that will bring it about - but most likely, not right away.

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